One of my mentors loves claiming, “Elimination is the highest form of optimization.”
There are things we know we should focus on, whether personal or professional. High-margin activities. There are other things, usually less obvious, that provide limited return on our investment of resources. Sometimes the best thing we can do is simply eliminate low-return items.
At Growth Guru, one of the ways we identify high vs low return items is by working through Right, Wrong, Missing, and Broken. The two categories relevant to this blog post are Right and Wrong.
Right are those high-margin items being done well in the company—the things that are working and driving profit. Wrong are those things that belong on our stop doing list. Examples we have worked through with clients include products that aren’t providing margin, customers that create headaches without profit (I find it amazing how often our clients’ most needy customers are the ones providing the least margin), or retention of bad employees.
By eliminating the Wrong items we optimize the company. One of our clients saw an increase in net profit when they eliminated sales to bad customers. The first thing we had them do was stratify their customers into A, B, C, and D categories. Once that was done, D customers, those who had unusual customer service demands at low-margin, were quoted full price and were expected to pay in full upfront. Not only did net profit immediately rise, but staff was freed from chasing bad customers and allowed to focus on wowing A and B level customers.
Elimination is the highest form of optimization.
-Eric Smith